Tax Environment

Tax Environment &

The Role of Taxpayers Associationsin Eastern Europe and Central Asia

Almaty, Kazakhstan,

August 22-24, 2002

Presented by:Nataliya Biletska, ConsultantThe World Bank, TPA Group

The World Bank

Tax Policy &Administration Group

The World Bank


Outline

Regulatory EnvironmentRegulatory Environment

Introduction: What is WBES?Introduction: What is WBES?1

2

Red Tape in Tax AdministrationRed Tape in Tax Administration3

Laws and RegulationsLaws and Regulations4

Taxpayer VoiceTaxpayer Voice5

The Role of Taxpayers AssociationsThe Role of Taxpayers Associations6

The World Bank


1. Introduction: WBES in brief

A World Bank Group initiative in partnership with other institutions.

An instrument to assess and An instrument to assess and compare the environment for doing compare the environment for doing business in countries around the business in countries around the worldworld.

A standard core enterprise survey using a uniform methodology.

The recent survey 2000/2001 covers 80 countries.

Addresses the issues of local local economic policy; governance; economic policy; governance; regulatory, infrastructural and regulatory, infrastructural and financial impediments and public financial impediments and public service quality, including tax policy service quality, including tax policy and administrationand administration.

What is WBES? …

World

BusinessEnvironmentSurvey

The World Bank


1. Introduction: WBES in brief

Why is WBES data is used?…

Addresses issues of local tax policy and administration; governance in tax authorities; legislation; policy- and law-making.

Provides a substantial comparative data for Transition Europe and OECD countries.

Indicates and measures the level of tax policy and administration problems in these countries.

Reveals the situation with the protection of the legal taxpayer rights.

Helps to assess the impact of businesses on policy- and law- making.

Draws lessons and perspectives for strengthening the protection of taxpayer rights and the development of taxpayers associations.

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Outline



2Red Tape in Tax AdministrationRed Tape in Tax Administration3




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2. Regulatory Environment

Regulations Representing Major or Moderate Obstacles for Business Operation and Growth by Region (%)

0

20

40

60

80

100

Transition Europe OECD

Major barriers in both regions

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Tax Environment as a Major or Moderate Obstacle for Businessesin OECD Countries (%)

0

20

40

60

80

100

UK

France

Ger

man

y

Spain

Potugal

Italy

Swed

en

Canada US

High taxes Tax regulations & administration


Countries with the most unfavorable tax environment

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Tax Environment as a Major or Moderate Obstacle for Businessesin Countries of Transition Europe (%)


0

20

40

60

80

100

Belar

us

Bulgar

ia

Croat

ia

Czech

Rep

ublic

Estoni

a

Georg

ia

Hungar

y

Kazak

hstan

Kyrgy

zsta

n

Lithuan

ia

Polan

d

Russi

a

Slova

kia

Ukrai

ne

Uzbek

ista

n

Avera

ge fo

r OECD

High taxes Tax regulations & administration

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Tax Environment as a Major or Moderate Obstacle for Businessesin Countries of Transition Europe


Country:High taxes

(%)

Number of total

responses (High taxes)

Tax regulations &

administration (%)

Number of total responses

(Tax regulations &

administration)

Belarus 91.93 (N=125) 76.00 (N=124)Bulgaria 81.15 (N=124) 62.91 (N=122)Croatia 95.27 (N=127) 70.87 (N=127)Czech Republic 89.63 (N=136) 81.62 (N=135)Estonia 62.79 (N=129) 46.51 (N=129)Georgia 92.25 (N=128) 74.22 (N=129)Hungary 86.82 (N=129) 65.11 (N=129)Kazakhstan 88.71 (N=127) 69.29 (N=124)Kyrgyzstan 96.80 (N=122) 79.51 (N=125)Lithuania 91.07 (N=111) 76.57 (N=112)Poland 83.33 (N=224) 68.75 (N=222)Russia 92.33 (N=519) 79.20 (N=521)Slovakia 74.80 (N=128) 66.40 (N=127)Ukraine 95.56 (N=223) 86.10 (N=225)Uzbekistan 70.17 (N=125) 50.40 (N=124)Average for OECD 87.41 (N=98) 70.27 (N=99)

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Tax Regulations / Administration as a Major or Moderate Obstacleby Firm Size

Small47%

Medium45%

Large8%

Small36%

Medium45%

Large19%


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High Taxes as a Major or Moderate Obstacleby Firm Size


Small47%

Medium45%

Large8%

Small38%

Medium45%

Large17%

The trend in how each group of firms assesses

both tax problems is consistent in both regions.

Small and medium firms view tax environment as a bigger

obstacle than large firms in both regions.

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Outline



2





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Corruption - Payments to Tax Authoritiesby Region (%)

60.69

26.24

10.862.22

96.86

2.420.72

0

20

40

60

80

100


"Never"

"Seldom"

"Frequently"

"Always"

3. Red Tape in Tax Administration

39% of firms make illegal payments to tax

authorities in countries of Transition Europe as opposed to 3.14% in

OECD countries

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Corruption - Payments to Tax Authoritiesin Countries of Transition Europe (%)


7.6

13.4

5.0 4.41.6

18.0

3.3

10.312.8

9.5 9.7

2.6

21.020.9

23.5

0

5

10

15

20

25

Belar

us

Bulgar

ia

Croat

ia

Czech

Rep

ublic

Estoni

a

Georg

ia

Hungar

y

Kazak

hstan

Kyrgy

zsta

n

Lithuan

ia

Polan

d

Russi

a

Slova

kia

Ukrai

ne

Uzbek

ista

n

"Always - Frequently"

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58.9 53.3

79.2

60.8

31.3

54.7

72.163.2

70.9

47.0 41.7

74.0

84.876.3

81.7

0

20

40

60

80

100

Belar

us

Bulgar

ia

Croat

ia

Czech

Rep

ublic

Estoni

a

Georg

ia

Hungar

y

Kazak

hstan

Kyrgy

zsta

n

Lithuan

ia

Polan

d

Russi

a

Slova

kia

Ukrai

ne

Uzbek

ista

n

"Never"

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Country:"Never"

(%)"Always -

Frequently" (%)

Number of Total

Responses

Belarus 76.27 7.62 (N=118)Bulgaria 58.93 13.39 (N=112)Croatia 73.95 5.04 (N=119)Czech Republic 81.74 4.35 (N=115)Estonia 84.80 1.60 (N=125)Georgia 53.33 18.00 (N=120)Hungary 79.17 3.33 (N=120)Kazakhstan 60.75 10.27 (N=107)Kyrgyzstan 31.30 23.48 (N=115)Lithuania 54.65 12.79 (N=86)Poland 72.11 9.48 (N=190)Russia 63.24 9.69 (N=506)Slovakia 70.87 2.59 (N=103)Ukraine 47.00 21.00 (N=200)Uzbekistan 41.74 20.87 (N=115)


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Outline



2





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Laws and Regulations:

4. Laws and Regulations

0

20

40

60

80

Easy to Obtain ConsistentInterpretation

"Agree" "Disagree"

0

20

40

60

80

Easy to Obtain ConsistentInterpretation

"Agree" Disagree"

Countries of Transition Europe (%) OECD Countries (%)

Interesting fact:

The situation with availability and consistency in interpretation is

the same in both regions.

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Laws and Regulations:

4. Laws and Regulations

Advance Information about Changes

(%)

Predictability of Changes

(%)

0

20

40

60

80

100

TransitionEurope

OECD

"Sometimes- Never"

"Always -Frequently" 0

20

40

60

80

100

TransitionEurope

OECD

"Disagree"

"Agree"

Businesses are more uncertain about changes in legislation and less frequently informed about these changes in countries of

Transition Europe than in OECD countries.

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Outline



2





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5. Taxpayer Voice

Business Voice in Policy- and Law-Making

"Seldom"41%

"Often"9%

"Always"1%

"Never"49%

"Never"20%

"Always"2%

"Often"23%

"Seldom"55%


Business voice is taken into account 2.5 times more

frequently in OECD countries than in countries of Transition

Europe.

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5. Taxpayer Voice

Business Voice in Policy- and Law-Makingin Countries of Transition Europe (%)

0102030405060708090

100

Belar

us

Bulgar

ia

Croat

ia

Czech

Rep

ublic

Estoni

a

Georg

ia

Hungar

y

Kazak

hstan

Kyrgy

zsta

n

Lithuan

ia

Polan

d

Russi

a

Slova

kia

Ukrai

ne

Uzbek

ista

n

Avera

ge fo

r OECD

"Always - Often" "Seldom - Never"

123

45

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5. Taxpayer Voice

Firms’ Influence on the Content of a New Legislation (%)

0

20

40

60

80

100

TransitionEurope

OECD

Executive (%)

Seldom -Never

Very-Moderately

0

20

40

60

80

100

TransitionEurope

OECD

Legislature (%)

Seldom -Never

Very-Moderately

0

20

40

60

80

100

TransitionEurope

OECD

Ministry (%)

Seldom -Never

Very-Moderately 0

20

40

60

80

100

TransitionEurope

OECD

Regulatory Agency (%)

Seldom -Never

Very-Moderately

Considerably high influence in

both regions

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Outline



2





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6. The Role of Taxpayers Associations

Ineffective tax regulations and administration in both regions although much higher in countries of Eastern Europe and Central Asia (ECA).

High taxes is a serious obstacle in both regions although much higher in ECA countries.

Small and medium businesses are more concerned about the tax problems than large businesses in ECA.

Ineffective tax regulations and administration in both regions although much higher in countries of Eastern Europe and Central Asia (ECA).

High taxes is a serious obstacle in both regions although much higher in ECA countries.

Small and medium businesses are more concerned about the tax problems than large businesses in ECA.

Illegal payments to tax authorities is a frequent phenomena in ECA countries (39%) comparing to OECD countries (3%).

Illegal payments to tax authorities is a frequent phenomena in ECA countries (39%) comparing to OECD countries (3%).

Business voice is taken into account 2.5 more frequently in OECD countries than in ECA countries.

The influence on the content of a new legislation is relatively high in both regions although lower in ECA countries.

Business voice is taken into account 2.5 more frequently in OECD countries than in ECA countries.

The influence on the content of a new legislation is relatively high in both regions although lower in ECA countries.

CorruptionTax Environment

Laws and Regulations

Taxpayer Voice

Availability of laws and regulations and the consistency in their interpretation is relatively insufficient in both regions.

Businesses are more uncertain about changes in legislation and less frequently informed about these changes in countries of Transition Europe than in OECD countries.

Availability of laws and regulations and the consistency in their interpretation is relatively insufficient in both regions.

Businesses are more uncertain about changes in legislation and less frequently informed about these changes in countries of Transition Europe than in OECD countries.

Problems Diagnosed by WBES

Solution

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6. The Role of Taxpayers Associations

Promote effective tax regulations and administration

Lobby for an efficient level of taxation

Target interests of small and medium businesses (RECRUIT as members)

Promote effective tax regulations and administration

Lobby for an efficient level of taxation

Target interests of small and medium businesses (RECRUIT as members)

Protect the legal taxpayer rights in tax authorities and courts

Protect the legal taxpayer rights in tax authorities and courts

Voice taxpayers’ interests to government and the general public

Actively participate in tax policy- and law- making

Initiate improvements in tax legislation

Voice taxpayers’ interests to government and the general public

Actively participate in tax policy- and law- making

Initiate improvements in tax legislation

CorruptionTax Environment

Laws and Regulations

Taxpayer Voice

Advocate for availability of laws and regulations

Provide information on current and new legislation affecting businesses

Fight for consistency/ uniformity in interpretation of laws and regulations

Watch for predictability of changes in new legislation

Advocate for availability of laws and regulations

Provide information on current and new legislation affecting businesses

Fight for consistency/ uniformity in interpretation of laws and regulations

Watch for predictability of changes in new legislation

Solution Taxpayers Associations

Need for Cooperation and Knowledge Sharing

Tax Environment

Business

Transcript of Tax Environment